Economics Editor, The Age

Don't believe what you've heard. Wages are barely climbing. The Bureau of Statistics compiles the only reliable measure, and it came out on Wednesday.

In the year to December, the bureau's wage price index rose 2.6 per cent. So low is the result that it is beaten by inflation at 2.7 per cent.

It is the lowest outcome this century and the lowest on record, because records date back only to the late 1990s.

Throughout most of the past 13 years wages have grown at more than 3.5 per cent. For four years from 2005 they grew at more than 4 per cent.

The Australian Chamber of Commerce and Industry describes the latest result of 2.6 per cent as “stagnant”. The Bank of Melbourne says it’s “soft like fairy floss”. It is soft because employment is soft. Wage growth always slows when employment growth slows, and it ramps up when the jobs market ramps up.

Australia has had next to no employment growth in the past year (the rounded growth rate published by the ABS is 0.0 per cent). The unemployment rate has crept up from 5.1 to 6 per cent. Private sector wages rose just 2.5 per cent, yet our leaders would have us believe this historically low growth rate has pushed Holden, Toyota, Alcoa, SPC and Qantas to the edge.

A few years back manufacturing wages were rising at 4 per cent. It is reasonable to ask why the present much lower growth rate (2.8 per cent) should cause problems when the higher rate of 4 per cent did not. Mining wages are rising at 3 per cent; two years ago they were 4.6 per cent. Construction wages are rising at 2.9 per cent; two years ago they were 4.3 per cent. Wages in the public sector are rising at 2.7 per cent. For every year this past decade they have risen by more than 3 per cent and at times more than 4 per cent.

The new lower rate of wage growth is good news for those concerned about a wage-price spiral. The lower dollar was pushing up the price of imports. If that had fed through into higher wages which had themselves fed through into higher prices, the Reserve Bank would have been concerned.

Exporters would have been worried too. Accelerating wage growth would have made them less competitive at the same time the dollar was making them more competitive.

Talk about wages hitting economic growth is political.

34 comments

At last some sanity prevails in the wilderness. What more can I say?

Commenter

Glenn

Location

Newcastle

Date and time

February 20, 2014, 7:45AM

Yes, but Gina wants to pay her workers $2 a day, so Tony and Eric Abetz have to abide by her rules and so will do anything to achieve this for her.

Let's have some sense from those who claim to be running the show. What don't Abbott and Abetz man up and admit that wages are stagnant, and therefore cannot be the cause of the 'problem' they have invented.

The real problem is the greed of company executives, who command millions of dollars a year in salaries and bonuses - and of course politicians who earn on average $500,000 a year (plus super).

But then, taxpayer-subsidised executives and politicans are the new elite and they are entitled to all this taxpayer largesse.

Commenter

Peter

Location

Melbourne

Date and time

February 20, 2014, 11:00AM

Wages are rising, for the politicians.

Commenter

Sensible

Date and time

February 20, 2014, 11:00AM

Good point raised by this article... though I would have elaborated further on the high Australian dollar... our dollar over the past couple of years has been double what it should have been, meaning imports are half price (how can our manufacturers, farmers, etc compete with that?)... as well as exports being double the cost overseas (how can our manufacturers, farmers, etc compete with that?)...

coupled with our dollar being way too high, we have this situation where both political parties love the idea of "free trade"... its too late for some industries, but we should be taxing the $#!+ out of imported produce from other countries that we can produce locally.

Commenter

Andrew

Location

Reality

Date and time

February 20, 2014, 11:14AM

I thought it isn't the recent wage rises that are the problem, it is the last decase plus of mining boom assisted rises across the board, which was fine during low unemployment/lack of labour. Now things are cooling down but once wages go up, its rather hard to come down again, other than via a falling AUD, which hasn't fallen enough

Commenter

Derrick

Location

Sydney

Date and time

February 20, 2014, 8:37AM

Inflation (in wages) is normally matched by inflation in pricing.

So for people to now be paid 40% above their worth due to wage inflation (the latest coalition claim), with inflation over the last decade being between 2-3%, then wages must have increased above inflation by an additional rate of a little over 3%. Which means each year for a decade we ALL must have been getting year on year pay rises exceeding 5%.

I suspect that no one in this country has had 5% every year for a decade, so the numbers must be wrong.

Just to put 5% year on year into perspective:Someone earning 55,000 in 2004 would be earning 94,068 in 2014.Someone earning 100,000 in 2004 would be earning 171,033 in 2014.

Since inflation is reliably the taller end of the 2-3% range (currently 2.7%) then these numbers above are conservative low end examples.

Commenter

Joe the POM

Location

Geelong

Date and time

February 20, 2014, 10:45AM

Derrick is right, Peter Martin makes the common error to look at statistics showing average wage growth, which is pretty meaningless for those individuals that dont fall in the average. Many workers have had few if any pay rises over the last 5 years, myself I have had 1 rise of less than 2%. Given the average is what it is, there are workers who have had massive pay rises over the years, much greater than inflation - this is why the average is where it is. The result is that the level of wages for some workers is now pricing them out of a job - if they are unwilling to take a pay cut, their employer will go bust and the job is gone, then they scream for a government handout beyond the safety net the rest of us rely on. Let the free market reign.

Commenter

ray

Location

melb

Date and time

February 20, 2014, 2:51PM

And the number of working poor increases as more low paid workers and their families enter the poverty level.

The cost of living is high in Australia. The high $ is hitting the export industry hard. So,it is the workers who have to bear the brunt according to a neo-liberal government, through decreasing real wages or increasing unemployment.

Meanwhile companies like BHB Billiton make profits in the billions, pay proportionally low tax to Australia and take the profits out of Australia. Unlike the Scandinavian countries, Australia only taxes the mining companies around 13% on profits whereas Norway imposes a much higher tax on every tonne of resource extracted and exported.

It is a resource rent tax aimed at compensating Norway for the removal of a non-renewable resource. Australia just gives her resources away. At the time the tax was imposed, the miners said they would stop mining in Scandinavia. But that has not happened.

Even a more modest resource rent tax would help Australia's revenue stream and stop this appalling targeting of workers to bolster an economy that is none of their making.

This government is following the ideals of the Tory government in Britain. A quick look at the results there says we should NOT be following their example.

In Britain, Unemployment is rising fast. 27% of their children are living in poverty and it is predicted if their policies continue then another 600,000 will be in poverty at the end of the year. Foodbanks in Britain are stretched to breaking point. Rents in London are unaffordable. The divide between rich and poor greater than in Edwardian times.

The Liberals are out of touch. They are wealthy and entitled. The neo-liberal ideology has infiltrated and indoctrinated. They believe "the Australian wages are too high" myth and Australians suffer.

Commenter

Tired of Spin

Date and time

February 20, 2014, 8:49AM

Wage growth might be low or next to nothing, but the truth which you ignore is industries such as holden, ford, spc, construction companies, transport ie union dominated industries have EBA agreements which have wage levels that are over and above the national award. These were all tied in three years ago. This is causing the issue, existing wage levels. Not all industries could be saved, but construction industry is a joke. A painter earning between $2000 and $3000 a week is ridiculous. The EBA agreement for Alcoa was out of control, some of the conditions on that were outrageous. During good times, no issues in spreading the wealth, but during difficult times EBA and unions don’t want to take a haircut so the businesses go bust. This is what we are seeing across the country. The reality is we are not getting value for money across the board, we have reached a ceiling whereby people are only prepared to pay X amount of dollars for a product, yet industries and businesses are locked into EBA agreements with entitlements well above national award levels. If these businesses operated within the levels of the national award most of them would be in a far better position.

Commenter

phil

Date and time

February 20, 2014, 8:50AM

Phil,

The data for EBAs by industry is available from the Department of Employment website. What it shows is a decline in pay rises for manufacturing EBAs over the past decade, with that decline accelerating in the past year.

The award is supposed to be a safety net, not the norm. We moved away from centralised wage fixing decades ago.

20 Feb
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